Single Touch Payroll guidance for your small business clients

Your smaller employer clients will soon be asking (if they haven’t already) for information and guidance on transitioning to the new way to report tax and superannuation information to the ATO — Single Touch Payroll (STP).

Once an employer starts reporting through STP-enabled payroll software they will be sending tax and super information to the ATO each time they run their payroll and pay their employees.

Briefly, here is the STP process:

an employer will run their regular payroll to pay their employees (eg weekly, fortnightly or monthly)

their employee receives their salary or wages, and their payslip as they did previously

the employer’s payroll software includes mandatory fields to capture the STP data, which includes year-to-date salary or wages and super information

the STP data is sent to the ATO. The STP file is called a “pay event”. The way the file is sent will depend on the software. This may be directly, or through a sending service provider (a third party)

the ATO receives the STP data and matches the information to the employer and their employees

the ATO makes STP information available to employees through myGov, to employers through the Business Portal and to tax agents through the Tax Agent Portal. Employees can see their year-to-date tax and super information.

Employers will no longer need to provide their employees with payment summaries for the information they report through STP. Employees will find the information they need to complete their income tax return in ATO online services, accessed through myGov. Employees who choose not to have a myGov account can contact the ATO to get a copy of their payment summary information.

STP data will also be available to tax agents in pre-filling. From January 2020, the ATO will pre-fill activity statement labels W1 and W2. And note that employers will no longer need to provide the ATO with a payment summary annual report (PSAR).

Employers will be able to offer online commencement forms to new employees, including Tax file number declaration, Superannuation (super) standard choice, Withholding declaration and Medicare levy variation declaration forms that can be sent to the ATO via myGov.

Commencement depends on sizeIf your clients had 20 or more employees on 1 April 2018 they will have already been required to report to the ATO through STP-enabled software from 1 July 2018, unless they’ve been granted a deferral.

Clients with 19 or less employees on 1 April 2018 can choose to report through STP now if their software is ready. Note that initial uncertainty that STP will be extended to all employers has now been clarified, as the legislation has passed Parliament as of 12 February 2019.

The ATO states that it does not expect small employers to purchase payroll software if they don’t currently use it. The ATO says that a number of different STP reporting options will be available from 1 July 2019, including low cost and simple reporting solutions. It will publish a list of these options as they become available.

Smaller employers will also have a number of alternate options that are not available to large employers – such as allowing their registered tax or BAS agent to report their STP information quarterly, rather than each time they run payroll. The ATO will also grant exemptions for employers who have unreliable internet access, however this will need to be dealt with on a case-by-case basis.

Before using STPEmployers will most likely need to take a few initial steps to be able to send data to the ATO. These have been outlined by the ATO on this web page.

Note that employers do not need an AUSkey if they are using a sending service provider (SSP) to send the STP file. The SSP will connect to the ATO using its own AUSkey.

Employers also do not need an AUSkey if they are using cloud-based or online software to send the STP file, as they will connect to the ATO using the unique software ID the software provider has given them (see below). Employers should check with their software provider if they do not have a software ID.

The software ID is similar to a serial number. Employers can notify the ATO of the software ID by phoning 1300 85 22 32, or completing a one-off notification through Access Manager (you need an AUSkey to use Access Manager). The ATO will not be able to receive the STP report without the correct software ID.

Employers will need their own AUSkey if they are using software that connects directly to the ATO, such as an on-premise solution.

What to do if your clients are not readyThe ATO understands the transition to STP is a major change for some employers. Employers, registered agents and software providers have been able to request more time to start STP reporting.

Some software providers applied to the ATO for a later start date (a deferral) for their employer clients. If a software provider has a deferral, they will advise their clients and provide them with a deferral reference number (DRN).

Employers do not need to do anything with the DRN. This number verifies the provider was granted a deferral by the ATO. Registered agents who also provide a payroll service can apply for a deferral for their clients by using the ATO’s online form.

FactsheetsThe ATO has provided some factsheets covering what STP means for both your employer clients and employee clients.